UK chocolatier Thorntons will look to restore profitability by concentrating on Easter and Christmas products in commercial channels as it shifts its strategy away from own-store sales, according to the firm’s CEO.
Jonathan Hart, Thorntons' chief executive, told ConfectioneryNews.com that by the end of fiscal 2014 half of sales would come in grocery stores and supermarkets.
“The seasons for us remain a significant opportunity,” said Hart, adding that Christmas orders were strong.
Thorntons is already well established in the UK Christmas specialty market in its retail network, but has only tackled one Christmas with big promotional activity in commercial channels.
The company’s share in the Christmas specialty market grew from 0.9% in 2010 to 2.7% last year, said Hart, adding to a 0.9% share gain over Easter.
New seasonal specialties and advent calendars for the commercial channel were introduced earlier this year to foster growth over Christmas.
Q1 sales flat
In its first quarter (Q1) trading update issued today, Thorntons grew in commercial channels by 10% to £21.2m ($34m).
However, total sales fell 1% to £46m ($74m) due to declines in the company’s retail footprint.
It closed 36 stores last financial year and a further 10 during the first quarter of this year.Thorntons previously announced a long-term strategy to close 120 of its 344 stores at a cost of around £4.5m ($7.2m).
Shares in the UK commercial market grew from 11.5% to 11.7% in 2011. He added that the firm holds a third of the inlaid boxed chocolates market in the channel.
This growth had come in spite of a weak overall marketplace, particularly for twist wrap, Hart added.
One concern Hart raised was grocers this year shifting the Christmas space by a few weeks compared to last year.
Grocers start with small orders for Christmas goods then take larger orders when bigger seasonal aisles are introduced in the lead up to the period.
Grocers changed the shift to larger orders by a few weeks causing Thorntons to alter its forecasts.
Products capturing common emotions, with chocolates carrying messages such as ‘I Love You, ‘Congratulations’ and ‘Sorry’, should also aid growth in commercial channel, he said.
Thorntons will launch a range of emotion-based products in its own-stores this weekend, with roll-out of selected items expected in commercial channels next year.
Asked if Thorntons might harm its reputation and sales as a ‘special occasion’ chocolatier by making offerings readily available in supermarkets, Hart said there was no real conflict and consumers already seemed happy to buy products in commercial channels.
Thorntons plans a more disciplined approach for international markets, which had previously been a “shotgun export strategy”, Hart said.
The firm’s exports sales grew 8.3% last year to £3.9m ($6.3m), fueled by the focus on commercial channels.
Thorntons hopes to grow in English-speaking markets such as Australia, South Africa, UAE and USA where consumers have some awareness of the brand. A longer-term strategy will be the emerging BRIC markets, said Hart.
There are no immediate plans to begin manufacturing abroad and there is still capacity to grow volumes by around a third with adequate investment in Thorntons' only factory in Derbyshire, said Hart.
Despite the long-term prospects of international markets, Hart emphasized: “We still have a job to do at home”.